Digital Sector Registers Highest Chargeback Rates

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Nearly a quarter of all UK digital subscriptions result in a
chargeback

This is the double the rate for the diet, health & beauty and
women’s products sectors

DUBLIN–(BUSINESS WIRE)–Digital subscriptions top the list of sectors worst affected by
chargebacks according to new data from Global Risk Technologies.

The chargeback and risk mitigation experts found that chargebacks
accounted for as much as 24% of all UK purchases in the digital sector
over the last quarter of 2015.

Chargebacks are the return of funds to a consumer that are forcibly
initiated by the issuing bank as the instrument used by a consumer to
settle a debt.

The data, based on material from 250 financial institutions, also
reveals that Russia, Australia and Brazil have the highest rates for
chargebacks for the sector across the globe, hovering around a third of
all purchases.

The analysis looks at 50 million transactions over the festive season
for the health & beauty, diet, men’s, women’s and digital subscriptions
sectors. It found that the diet, health & beauty and women’s products
offered better news for UK retailers; the percentage of chargebacks for
these being around half of those for the digital sector, according to
cross-industry data from one major UK high street bank.

However, the male product sector registered a 20.5% chargeback rate from
the same bank. Monica Eaton-Cardone founder and CIO of Global
Risk Technologies comments:“What is particularly surprising
about the new data is that it is the digital sector that is being hit
hardest by chargebacks.

“Fraudsters are targeting vulnerabilities online that don’t exist in the
card-present world. More needs to be done to protect consumers online to
avoid unauthorised transactions being completed and hitting merchants in
the form of costly chargebacks.

“A staggering 86% of chargebacks are fraudulent and many consumers often
bypass merchants to directly file complaints with card-issuing banks.

“In my opinion, chargebacks are generally a learned behaviour. Most
consumers do not intentionally attempt to get something for free the
first time there is a dispute. However, once they profit from so-called
friendly fraud, many are tempted to repeat fraudulent chargebacks.

“Fraudulent activity affects the merchant’s bottom line and in turn
those losses are often pushed onto the prices consumers pay.

“Merchants can take effective precautions that can reduce chargebacks,
such as asking for Card Security Code numbers (CVC) and cross checking
IP addresses to physical addresses.

Merchants can and must learn to dispute fraudulent behaviour with
knowledge and confidence.”